Previous Ethics Investigations Cause FEMA Nominee to Withdraw

Twelve years ago, Hurricane Katrina slammed into the Gulf States, devastating New Orleans and other portions of Louisiana, as well as Mississippi, Alabama, and Florida. While there were many mistakes and fingers pointed during the planning, rescue, and reconstruction operations, one issue that caused concerns was the sole source award of four half-billion-dollar assistance contracts for “critically needed services such as setting up Disaster Recovery Centers, the hauling and installing of temporary housing and other logistical and facilities management needs[.]” Those contracts have been the subject of numerous reports of wasteful spending.

Former Federal Emergency Management Agency (FEMA) official Daniel “Dan” Craig, who headed up some of that temporary housing work, was nominated by President Trump to be the FEMA Deputy Administrator in July. However, according to NBC News, and confirmed by POGO, Craig withdrew his nomination yesterday.

The Project On Government Oversight has been working on Craig’s involvement at FEMA for 11 years. Yesterday’s news that Craig withdrew his nomination does not come as a surprise, as he was likely facing many hurdles during his Senate confirmation hearing.

His 2005 self-reported potential ethics violation to the Department of Homeland Security (DHS) Inspector General (IG) is one factor that might have contributed to Craig’s decision to step aside. Craig’s report involved his post-FEMA employment negotiations with companies that received lucrative non-competed contracts days after Hurricane Katrina hit Louisiana.

These negotiations occurred in mid-2005 when Craig served as the Director of FEMA’s Recovery Division. He resigned his FEMA post soon after Hurricanes Dennis, Katrina, and Rita.

As part of an investigation into those FEMA housing contracts, POGO submitted a Freedom of Information Act (FOIA) request to DHS in August 2006 (and a subsequent FOIA appeal in 2016) for any communications between Craig and the four companies that each received a $500 million non-competitive contract: Shaw Group, Fluor Corp., Bechtel National Inc., and CH2MHill—all of which were companies where Craig had reportedly sought employment.

Finally, after 11 years, the DHS IG supplied the previously nonpublic report from 2007 to POGO. That report and its exhibits highlight Craig’s employment negotiations with two of the four sole source FEMA housing contractors—Fluor and the Shaw Group—the latter of which was a client of Craig’s post-FEMA employer.

See the interactive timeline:

Although the IG report released to POGO concludes “that Craig had no involvement with the Shaw Group emergency contract,” the details, timeline, and some of the evidence gathered by the IG are quite concerning to POGO. What is missing from that report also raises concerns.

First, the investigation seems to have been wrapped up without talking to Craig’s staff who were heading up the contract awards to Shaw and Fluor. In fact, the IG’s report focused on a seemingly small amount of evidence, and didn’t take sworn statements from Craig’s staff to determine if he had any involvement in the Shaw or Fluor housing contracts.

Second, the IG seemed to ignore Craig’s own admission that, as early as June 2005, he “decided to leave FEMA for personal reasons and met with two companies to discuss post-FEMA employment.” One was Shaw, which was on FEMA’s shortlist of temporary housing contractors potentially as early as July, approximately the time Craig’s discussions with Shaw began. The other company was Fluor, which had been a FEMA contractor since at least 2003 and had received a non-competed FEMA contract “to assist FEMA in the [Hurricane Dennis] disaster relief effort” in July 2005. Craig’s own sworn statement further details that during his employment negotiations with Shaw and Fluor, which included meetings with senior company executives, his division participated in the non-competitive contract award to Fluor and that “(since July) FEMA Recovery Division was doing market research and creating a scope of work for national Individual Assistance contracts to be competed.”

As for Shaw, Craig didn’t seem worried about any conflicts even though his division was creating a shortlist of emergency housing contractors. Craig stated that as of mid-July 2005 Shaw “had no business or contracts with FEMA.” Although that was the case at that time, such a statement did not reflect the fact that Shaw was on his office’s list for temporary emergency housing contracts, which would have triggered Craig’s disqualification if he was interviewing with the company.

Craig was equally not concerned about the existing Fluor contract, stating that the company was “chosen” by a procurement officer and at the time he “ended [his] talks in earnest with Fluor.” His involvement with Fluor, both personally and professionally, should have raised questions by the IG. Instead, the IG seemed to ignore Craig’s involvement with Fluor altogether.

Craig’s division continued overseeing the Fluor contract despite his employment discussions with the company. The division was also planning new contracts with Shaw at the time Craig was talking to Shaw executives in Virginia and Louisiana about future employment. Internal FEMA emails that DHS provided to POGO in response to FOIA indicate that Craig was involved in decisions about the “IA TAC Housing Contracts” as of July 26, 2005. He did not officially disqualify himself from handling matters related to Shaw, Fluor, or the other housing contractors until August 27, 2005, only days before FEMA awarded millions of dollars in non-competitive contracts to Shaw, Fluor, Bechtel National, and CH2M Hill. Simply stated, Craig’s recusal came too late in the process and the IG should have fully investigated all of his contract-related activities involving Shaw, Fluor, and the other housing contractors.

The IG file even includes an allegation from a FEMA ethics attorney that Craig was still “actively involved in the procurement process involving Shaw Group and other FEMA contractors after [Craig] said he had disqualified himself from working with these FEMA contractors—per his August 27, 2005 recusal letter.” The ethics attorney then asked about the “status of this matter?” The IG responded only minutes later, stating, “Thank you for the email. I am not permitted to give any updates on an open case. Sorry.”

Missing from the IG’s reply to POGO were any subsequent investigations of Craig related to Shaw, which, according to reporting by NBC News, had been conducted. During POGO’s own investigation, we learned that the DHS IG had also investigated Craig for potentially related time-keeping and travel violations. According to multiple POGO sources, Craig was investigated for billing the government for time spent interviewing with the Shaw Group. Based on documents the IG did provide to POGO, we believe that trip occurred sometime in July or August 2005, possibly a few days prior to Hurricane Katrina. POGO found one reference to that IG investigation at Governmentattic.org, which states that the IG was looking into allegations of “Lack of Fairness/impartiality” (see entry for I07-FEMA-DAL-11496, p. 18 of 24). POGO filed an expedited request for this report last week.

NBC reviewed a 2011 DHS IG report summary, which highlighted a joint investigation between that office and the Federal Bureau of Investigation. According to the news outlet, Craig was alleged to have violated travel and timecard rules. Craig disputed the IG report’s conclusions, according to NBC News.

Craig’s Post-FEMA Employment Negotiations

The story of Dan Craig’s departure from FEMA reads like an example of what not to do from an ethics perspective. It is also a glaring example of the revolving door that causes reasonable public distrust in government. The many omissions in the IG’s investigation further highlights that addressing the revolving door and potential conflicts of interest are not a high priority in some government circles.

On September 1, 2005, when FEMA was in full crisis mode, Craig was entertaining a job offer from the Shaw Group with a base annual salary of $175,000, a $50,000 signing bonus, and other bonus and stock options. Craig declined, stating that he turned the offer down “given the company is now a contractor.” Craig added that he recused himself from any involvement with Shaw and that he had “declined the offer due to the appearance of impropriety” because Shaw had received one of the emergency sole source contracts in late August.

While his recusal in late-August appears appropriate, Craig’s ethics endeavors should have started many months before he received the job offer from Shaw. A conflict of interest law requires government officials to step aside from matters in which they have a personal financial interest as soon as the prospective employment negotiations begin—not when they are completed. According to the Justice Department, the time to disqualify oneself from government activities starts when the government official sends in a resume for a job in the private sector.

In the case of Dan Craig, that process began in June, well before he officially disqualified himself from matters involving certain FEMA activities on August 27, 2005.

Craig had planned to resign from FEMA at the end of September, but his post-government employment search started long before Hurricane Katrina hit land and Craig submitted his recusal notice, which he amended in late September.

Despite the IG’s conclusion that Craig was not involved in the Shaw Group contract, the IG’s report includes a “Time Line” from a FEMA ethics attorney that questions Craig’s actions. That timeline states that Craig met with, and provided a resume to, a Fluor official in June and that his negotiations with Shaw began a month later. The IG’s report indicates that, in early August 2005, Craig was holding weekly meetings about the temporary housing contracts, and that FEMA employees were beginning to piece together those Katrina contracts. According to the ethics attorney, one FEMA official stated that “Dan Craig ‘advised and directed’ as to what needed to be done to complete the 5 year IA Contract plan,” which subsequently were awarded to Fluor and Shaw.

Craig even visited the Shaw Group headquarters in Baton Rouge, Louisiana, on August 4 and August 25, 2005—the later visit coming the same day Hurricane Katrina hit Florida and only days before it slammed into Louisiana. On August 27, 2005, according to the IG’s summary, Craig filed a disqualification notice with FEMA stating that he was seeking employment with the Shaw Group, Fluor, Bechtel, and CH2MHill. Days later, FEMA awarded the non-competed temporary housing contracts to all four of those companies. The ethics attorney noted that, on August 29, he asked a FEMA official (whose name was redacted) if Dan Craig approved the criteria for the emergency Katrina housing contracts. The attorney’s timeline indicates that the official “assumed” Craig was involved because “his representative[] was actively involved.”

The ethics attorney’s timeline also indicated that the following day, August 30, Craig put out a memo to FEMA officials discussing the housing contracts, which could conflict with his disqualification notice filed two days earlier. In the subsequent days, FEMA emails show, Craig was directing his staff to use the temporary housing contracts, two of which were awarded to companies that Craig interviewed with in the preceding days and months. The following day, September 1, Craig received a lucrative job offer from the Shaw Group to lead its government relations division.

Evidence collected by the ethics attorney also references an email in which Craig directed a FEMA employee “to establish a [Joint Field Office] in Houston, and assigning Shaw Group that task.” The attorney’s timeline goes on to state that “This email makes clear that DC [Daniel Craig] was still directing actions on the Shaw contract after he had disqualified himself on August 27, 2005.”

Craig’s involvement does not end there. Despite his disqualification from the four large housing contractors, Craig was included on numerous emails by the staff of the Recovery and Procurement divisions discussing those contracts and the need for “Urgent Action.” The substance of those emails was redacted in the records provided to POGO. While Craig’s email communications were limited, those FEMA emails indicate that Craig replied. His responses remain a mystery, however, because they, too, were redacted from the records provided to POGO. In replying, Craig could have violated his promise to disqualify himself and possibly violated the ban on participating in matters in which he had a financial interest.

According to the ethics attorney’s timeline, Craig was also sent an email from a FEMA Region II Federal Coordinating Officer who wrote, “Shaw contract has been a godsend here in san antonio [sic]. Thanks for putting it in place.” Craig responded, “Thanks for the note, but at this time I am not in a position to discuss the IA TAC contracts.” Although Craig’s reply itself is an appropriate response, the email from the Federal Contracting Officer raises additional concerns about Craig’s involvement in the Shaw contract, which the IG does not explain, especially in its conclusion that “Craig had no involvement” in the Shaw contract.

According to the records provided to POGO, Craig reported his own potential ethics violation on September 23, 2005, nearly one month after the post-Katrina contracts were awarded to Fluor and the Shaw Group on or about August 29.

The IG’s record indicates that the ethics attorney discussed possible criminal ethics violations with the FEMA general counsel and the DHS ethics counsel, who “strongly opposed referral of this matter to the DHS OIG,” because they did not believe that Craig committed a violation. The ethics attorney wrote, “I was convinced that I should do no more investigation into this matter, as only the DHS OIG has authority to do such investigations, and they should determine whether there is any criminal ethics violation by [Craig], not the DHS [Designated Agency Ethics Official] or the FEMA General Counsel.”

Craig submitted a second Notice of Recusal to FEMA on September 21, 2005, naming 12 companies, including the Shaw Group and law firm Akerman Senterfitt, where Craig eventually landed. This notice came weeks after Craig wrote to DHS Secretary Michael Chertoff that he was resigning and his departure date would be within the next two months.

He departed FEMA on September 30, and was hired as a consultant for Akerman Senterfitt. The ethics attorney’s timeline states that in the month after leaving FEMA, Craig asked the ethics attorney “if he can represent firm clients back to FEMA.” The attorney advised Craig that he was banned for a period of one year from “contacting his old agency on behalf of a third party.”

Less than a year later, an Akerman Senterfitt lobbying report listed Craig as an “individual who acted as a lobbyist” on behalf of Shaw, including potentially before FEMA on disaster relief issues. That lobbying report was amended to remove Dan Craig’s name as a lobbyist a few months later, which was likely during the time of the IG’s investigations into Craig. Akerman’s lobbying for Shaw was terminated on September 2, 2006, the day after Akerman filed its amendment 2006 report that delisted Craig.

Craig’s withdrawal from consideration for a top FEMA position might be in the best interest of the agency, which is fully engaged in helping those effected by Hurricanes Harvey and Irma. The fact that the Senate Committee on Homeland Security and Governmental Affairs had not scheduled a confirmation hearing for Craig, despite scheduling them for other FEMA nominees, might indicate that the Committee had some concerns about approving Craig’s FEMA return. We will never know how this would have played out, but the DHS IG report received by POGO is another example of a revolving door that is spinning out of control and an IG who did not seem interested in scrutinizing a former public official.

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